No Capital Gains Cut: Rostenkowski : Ways and Means Chairman Asks ‘Realistic’ Approach

Rep. Dan Rostenkowski (D-Ill.) chairman of the House Ways and Means Committee, today promised all-out opposition to President Bush’s proposal to reduce the tax on capital gains.

“I’m not about to tell the wage earners in Chicago that they should pay a higher tax than stockbrokers,” Rostenkowski said in a speech to the National Press Club.

“I personally will strongly resist any efforts to undo (the 1986) tax reform, including the return to a preferential tax rate for capital gains,” Rostenkowski said.

He spoke eight hours before Bush was to deliver a package of budget recommendations that was expected to include a call for lower taxes on capital gains, which are profits from the sale of stocks, real estate and other assets.

There is strong support in Congress, principally among Republicans but even among some Democratic liberals, for taxing capital gains at a lower rate than applies to wages and other income. Capital gains and most other income now are taxed at rates of either 15%, 28% or 33%.

Seventy percent of capital gains are taken by people with incomes above $100,000 a year.

Rostenkowski sounded another familiar theme at the press club: Despite Bush’s campaign pledges, any realistic plan for reducing the budget deficit must include tax increases, he said.

“If President Bush is willing to put all spending and revenues on the table, he will find a Congress willing to make the tough choices that real deficit reduction requires,” he said.

The veteran lawmaker said that former President Ronald Reagan also made a no-tax pledge but that during his eight years in office, “Reagan raised more taxes than any peacetime President.” Reagan signed more than a dozen tax increases.

Rostenkowski said the 1990 budget left by Reagan was based on highly optimistic projections on how the economy will perform.

“Does anyone really believe that real growth will be 3.2% this year? Or inflation at 3.8%? Or short-term interest rates at 6.3%?” Rostenkowski asked. “Those are the numbers in the last Reagan budget.

“I hope I don’t see them in President Bush’s budget. I don’t want to raise taxes, but I won’t participate in a sham.”